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Exclusive: After Firstpost Expose, Uttar Pradesh Co-Operative Bank Manipulates Balance Sheet To Cover Up NPAs

Exclusive: After Firstpost Expose, Uttar Pradesh Co-Operative Bank Manipulates Balance Sheet To Cover Up NPAs

New Delhi: After Firstpost's expose on Uttar Pradesh Co-operative Bank Limited (UPCBL) for financing tainted Simbhaoli Group and converting the non performing assets (NPAs) of Kesar Sugar Mills into a long-term loan, a rattled top bank management manipulated the balance sheet to show that bank was running in profit and even paid Rs.27 crore as income tax.

Firstpost on 13 March had also reported irregularities in the recruitment at UPCBL and it is learnt that the Chief Minister Yogi Adityanath has recently ordered a probe by a Special Investigation Team (SIT). Registrar of Cooperative Societies, Uttar Pradesh, NK Singh has also stepped in and has asked the UPCBL to cancel the Rs.60 crore loan sanctioned to Simbhaoli Group that is being investigated by the Central Bureau of Investigation (CBI) and Enforcement Directorate (ED) for duping the Oriental Bank of Commerce (OBC) to the tune of Rs 109 crore. As per the rules, the cooperative banks are supervised by the Registrar of Cooperative Societies (RCS) of state concerned.

Sources said a manager level officer of the Bareilly branch has been suspended by the top brass of UPCBL after she refused to sign the manipulated balance sheet.The most shocking part of the alleged cover-up is doctoring the balance sheet, which eventually made the hole in bank’s treasury and in the long run may pose serious threat for its survival. The Firstpost has accessed both the original and manipulated balance sheet of UPCBL that describes position of consolidation of NPAs till 31 March 2018. The draft balance sheet of its Bareilly branch indicated Kesar Sugar Mills had NPAs of Rs.74 crore. This was rejected by the bank's top management and the amount was surreptitiously moved to sub-standard loan category in a bid to show the profit in the final balance sheet prepared by the bank.

“She had forwarded the genuine balance sheet to the UPCB headquarters. It was returned and she was asked to make changes to show profit and zero NPA. She refused to tinker with the facts and subsequently paid the price for being honest and upright,” Sources added.

Despite repeated attempts, UPCBL Managing Director RK Singh did not respond to calls and text message.

Crackdown by CM and registrar 

It is learnt that after Firstpost's expose on 13 March 2018, the chief minister’s office wrote to Registrar UP Cooperative Societies on 28 March 2018 to probe into the scandal. The preliminary investigation conducted by the RCS NK Singh revealed the massive irregularities. He dispatched the findings to the secretary, cooperative, UP government on 10 May 2018. The note accessed by the Firstpost shows that regulatory body of cooperative societies National Bank for Agriculture and Rural Development (NABARD) had also objected to UCBL proposal of loans to Simbhaoli and restructuring of loans to Kesar Sugar Mills that was ignored by the UPCBL’s chief RK Singh.


NABARD officer in a confidential letter made it clear that the two proposals linked to Simbhaoli and Kesar were not discussed in the meeting attended by the representative of the regulator and entire decision was taken unilaterally by the Managing Director RK Singh. The Firstpost has reviewed the NABARD letter which makes it clear that UPCBL decision towards the two companies facing huge NPAs was approved by the bank’s chief.



“Restructuring of Rs.65.81 crore loan to Kesar Mills and sanctioning of Rs.60 crore to Simbhaoli Power was not discussed in the board meeting. We disagree with the decision taken by the UPCBL,” the letter signed NABARD’s BN Hembram said.

The Registrar NK Singh has also examined the letter of NABARD. He said despite the NABARD’s objection, UPCBL Managing Director RK Singh issued the sanction letter to Simbhaoli owners, which is considered as a colossal violation of banking rules.

“Registrar Office through a letter number 54 dated 27 March sought explanation from RK Singh. He replied through letter number 1416 dated 3 April 2018 saying that a letter was issued to Simbhaoli but since the objections were raised by the NABARD, the proposal has been put on hold through a letter dated 23 March 2018. This makes it clear that despite NABARD’s objection, not only the loan to Simbhaoli was sanctioned but letter was also issued which was illegal,” NK Singh wrote in his report.

The probe further revealed that both Simbhaoli and Kesar Sugar Mills were not eligible for the loan and the ‘proposal was illogical.’

“It is important to note that Ashok Singh, Member of UP Cooperative Seva Mandal, who had earlier served as Managing Director of UPCBL, in a testimony has disclosed that he wrote a letter to RK Singh last year against the irregularities in loans sanctioned to Kesar Sugar Mills and how rules were flouted in the case but no action was taken. Ashok Singh had also advised the UPCBL to recover Rs.20.40 crore with interests from the company. Despite his warnings, UPCBL board meeting on 31 January cleared the proposal of Rs.65.81 crore for Kesar Sugar Mills. Prima facie the UPCBL move has been found to be irregular,” Registrar NK Singh wrote in his report on 10 May, 2018 sent to the state government.

NK Singh, on 28 March 2018, had forwarded a separate letter to the chief secretary of the state flagging massive irregularity in appointment at UPCBL. He was perplexed by the fact that a majority of candidates finally selected on various positions, were from the same district Etawah. The letter reviewed by the Firstpost shows that out of 30 candidates selected for the post of assistant cashier, 17 were from Etawah. Similarly, out of 33 selected for the post of cashier clerk, 17 were from the same district. For other positions too Etawah figures prominently in the list.

“It appears, qualification was not the criteria for the selection of candidates at UPCBL. We have found serious irregularities in the appointment and a thorough investigation either by vigilance or a Special Investigation Team is necessary,” NK Singh wrote.

Meanwhile, UP State Employees Confederation’s chief Ajay Singh has filed a complaint with the Reserve Bank of India (RBI) and chief minister’s office alleging that RK Singh connived with Kesar Sugar Mills to extend undue benefit. The association has also requested the statutory auditor not to certify the manipulated balance sheet.

“They planted 25,000 bags of sugar on 9 April 2018 in the godown to show that the UPCBL has security against the money sanctioned to Kesar Mills. An officer of the bank handling Kesar Sugar Mills has reported that the company owes Rs.90 crore to farmers and the government may acquire the 25,000 bags of sugar worth Rs.6.5 Crore and proceed would go to the farmers. It is very clear that UPCBL doesn’t have the exclusive rights over this sugar stock and the so called security against the loan is merely an eyewash,” Singh wrote in his letter dated 8 June, 2018.

Singh is making efforts that balance sheet should not be certified as it would cause huge loss to the UPCBL in the next financial year. He also wants that after correction in the manipulated document, the income tax should return Rs.27 crore to the bank.

“I have come to know that Managing Director RK Singh has admitted security against loans to Kesar Sugar Mills that has already been pledged to Allahabad Bank, UCO Bank and Punjab National Bank. They have first charge of the security pledged in 2011 while UPCBL is left with residual charge, which is legally not tenable. In order to show profit Rs.138 Crore that was part of additional funds of bank was used to hide NPA of Simbhaoli sugars. We are planning to move to Lokayukta in this matter,” Singh further wrote in his complaint.

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